NLD players find the going tough

Fiscal ’06-07 was a heartbreak year for NLD players. Registering a 20% decline in growth, the NLD segment revenue decreased to Rs 7,186 crore. Even though the number of minutes have increased there has been a drop in overall revenue of the NLD segment due to aggressive competition between all the integrated operators—BSNL, Bharti, Reliance, and VSNL.

The other factor that influenced the decline in growth was drop in STD prices that resulted in huge fall in revenue. But, good news was the regulatory changes that excited the market. The entry fee for NLD license was reduced from Rs 100 crore to Rs 2.5 crore, and as a result lot of players grabbed their share of the pie in the telecom and infrastructure sectors in India by acquiring licenses for offering NLD services.

PLAYERS

Even with a 31% decline in growth, the predominant position of BSNL remained unchallenged. On the basis of the sheer size of its network BSNL continued to lead the NLD business with revenue of Rs 4,665 crore. The total deployment was over 500,000 Rkm of OFC and about 65,000 Rkm of microwave links till the end of FY ’06-07.

Bharti was placed in the second spot with revenues of about Rs 1,035 crore. It increased NLD minutes by 114% as compared to FY ’05-06 and added 7,500 km of optic fibre cables (OFC) taking total deployment to over 40,484 km. It showed a growth rate of 29.2%.

Reliance showed an 8% decline in growth to touch revenue of Rs 635 crore. It has established over 80,000 Rkm of ducted OFC. In addition, Reliance has a unique asset in over 20,000 route kilometres of ducted OFC installed in leading cities in India. The entire inter-city and metro fibre optic backbone network is deployed in a ring and meshes architecture and is MPLS enabled. Its total NLD traffic was were 4,873 mn minutes.

VSNL revenue in FY ’06-07 was Rs 505 crore. It has laid 40,000 km of transmission network which has a reach in 300 major town; its fibre optic metro area network is available in twelve cities and has wire line last mile presence in thirty cities for the enterprise and retail sectors.

For FY ’06-07 Idea’s revenue was Rs 78 crore in its first year of entry in this segment. It has commenced carrying part of its own traffic under the license, and lots of activities are planned for operations and investment in FY ’07-08. Presently, Idea’s NLD business is dependent on leasing and buying capacities from various agencies, but the company is taking a long-term view in terms of building NLD infrastructure. The company is also actively engaged in assessing alternative routes for fibre and switching equipment. Also, it is planning to expand its network in FY ’07-08.

In FY ’06-07, NLD licenses were issued to BT Telecom, Idea, Sify, Aircel, AT&T, and Tulip IT. Out of these BT Telecom India has acquired i2i and will offer services directly to multi-site corporate customers in the Indian market. At present, they have around twelve nodes, the latest one is at Chennai. AT&T was the first MNC to apply for and receive an NLD license under the 74% FDI guidelines. It was also the first to launch services under their own license.

AT&T has partnered with the Mahindra Telecommunication Investment to create this joint venture in India—AT&T Global Network Services India. Under the license they are providing enhanced virtual private network (EVPN) services based on multi-protocol label switching (MPLS) standards. Hutchison Essar and Aircel are in the planning stage and will commence services in FY ’07-08.

Aircel got a letter of intent (LoI) in May 2007, and plans to set up base infrastructure across fifteen locations in India. Its key equipments and components would be soft switch—class 5—which would enable switching of calls on packets based platform thus optimizing the capacity of the network. It will also provide call detail records for billing and network monitoring purpose, and media gateway which would provide TDM to IP conversion and CODEC implementation for optimization of bandwidth. MTNL also got the NLd licence and they offer services between Delhi and Mumbai.

UTILITY PLAYERS

As a part of the strategic alliance ‘Triveni’ RailTel, GailTel, and PowerTel have signed an MoU to face the competition in telecom business together. As per their consortium they would be sharing each other’s network so as to serve a wider market. This will result in pooling of their resources for better management and customer satisfaction. As a result of which they reflected an upbeat growth.

Continuing the past trend, RailTel has yet again achieved higher performance in FY ’06-07. RailTel has closed the year 2006-07 with a revenue income of Rs 116 crore. It offered VPN (Layers 2 and 3) under the NLD license and it also has IP-1, IP-2, the Cat ‘A’, and ISP licenses. RailTel has laid 30,790 Rkm of OFC, out of which 1,919 Rkm were laid during FY ’06-07. Further, 28,124 Rkm of OFC was commissioned up to March 2007, adding 2,855 Rkm during 2006-07.

RailTel has created 2,828 points of presence (PoPs), including 201 cities, in the entire country providing much needed telecom connectivity to remote and backward areas. In FY ’06-07, a total of 421 stations were added on the OFC network. RailTel would soon be launching inter-circle callings services for service providers who do not have NLD licenses or who have licenses but don’t have the infrastructure to support it.

PowerTel’s (telecom wing of Powergrid) revenues for FY ’06-07 stood at Rs 77 crore as against Rs 40 crore last year. It is one of the few telecom players with a marked presence in remote areas viz North Eastern Region, Jammu and Kashmir, Himachal Pradesh, etc. PowerTel has already established about 19,000 km of optic fibre network connecting various cities and its power transmission network is of 50,000 Rkm.

Most of the PowerTel’s optic fibre backbone network is laid overhead on the extra high voltage power transmission lines, and, therefore, offers distinct advantage over the underground optic fibre network in terms of robustness, vandalism proof, rodent and termite proof, etc, thus offering high reliability.

GailTel posted revenues of Rs 25 crore in FY ’06-07. Its high speed optic fibre network extends to well over 13,000 km connecting around 200 cities across various states like Rajasthan, Gujarat, Madhya Pradesh, Maharastra, Uttar Pradesh, Andhra Pradesh, Haryana, Chandigarh, Delhi, Karnataka, Tamil Nadu, and Kerala. With SDH and DWDM as the core layer, the network is built largely along the highly secured GAIL cross country pipeline corridor and also configured in "self-healing" rings to ensure highly reliable and error free service to its customers.

OUTLOOK

The Indian NLD market place is a high growth market, which is attracting the attention not only of global service providers, but also forcing Indian telcos to rethink their strategies to harness the tremendous growth potential that is available. With so many players in the foray, the NLD segment can look forward to green pastures ahead.

Sandeep Budki

sandeepb@cybermedia.co.in